You and your policies are really getting the economy moving Barack.....NOT!...You do NOT deserve another term as President....you need to be soundly beaten in the 2012 election...
Q2 growth tepid; Q1 revised down sharply
WASHINGTON | Fri Jul 29, 2011 9:09am EDT
WASHINGTON (Reuters) - The U.S. economy came perilously close to flat-lining in the first quarter and grew at a meager 1.3 percent annual rate in the April-June period as consumer spending barely rose.
The Commerce Department data on Friday also showed the current lull in the economy began earlier than had been thought, with the growth losing steam late last year.
That could raise questions on the long held view by both Federal Reserve officials and independent economists that the slowdown in growth as the year started was largely the result of transitory factors.
Growth in gross domestic product -- a measure of all goods and services produced within U.S. borders - rose at a 1.3 percent annual rate. First-quarter output was sharply revised down to a 0.4 percent pace from a 1.9 percent increase.
Economists had expected the economy to expand at a 1.8 percent rate in the second quarter. Fourth-quarter growth was revised to a 2.3 percent rate from 3.1 percent.
"The second quarter disappointed, but the first-quarter downward revision is more disturbing. It advances the pangs of concern. The debt ceiling nonsense is not going to help us. We're already in an economy that is subpar," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
"Gasoline price increasing from $3 to $4, that really slapped the consumer back considerably."
U.S. stock index futures added to losses and government debt prices extended gains after the weak GDP data. The dollar fell to a four-month low against the yen, while the Swiss franc hit a record high against the greenback.
Economists had expected the economy would show signs of perking up by now with Japan supply constraints easing and gasoline prices off their high, but data has disappointed.
This and the sharp downward revisions to the prior quarters suggest a more troubling and fundamental slowdown might be underway.
There is also heightened uncertainty over the outlook because of the impasse in talks to raise the nation's borrowing limit and avoid a damaging government debt default.
The Treasury says the government will soon run out of money to pay all its bills.
Economists have warned that a debt default could push the fragile economy over the edge.
"Clearly this is evidence of a mid-cycle slowdown. The only question now is do we see a pick up in the second half and so far the economic data to date doesn't suggest that," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.
Data released on Friday showed the 2007-2009 recession was much more severe than prior measures had found, with economic output declining a cumulative of 5.1 percent instead of 4.1 percent.
The annual revisions of GDP data from the Commerce Department showed the economy contracted at an annual average rate of 0.3 percent between 2007 and 2010. Output over that stretch had previously been estimated to have been flat.
The economy needs to grow at a rate of 2.5 percent or better on a sustained basis to chip away at the nation's 9.2 percent unemployment rate.
CONSUMER SPENDING BRAKED SHARPLY
The March earthquake in Japan severely disrupted U.S. auto production. The resulting shortage of motor vehicles weighed on retail sales as consumers were unable to find the models they wanted. That combined with high gasoline costs to curb spending.
Consumer spending, which accounts for about 70 percent of U.S. economic activity, decelerated sharply to a 0.1 percent rate -- the weakest since the recession ended two years ago.
Spending grew at a 2.1 percent pace in the first quarter.
Motor vehicle production subtracted 0.12 percentage point from gross domestic product growth in the second quarter, after adding 1.08 percentage points to first-quarter GDP growth.
The composition of growth in the April-June quarter was weak and could prompt economists to dial down their expectations for a quick and solid rebound in the third quarter.
A smaller trade deficit, as imports slowed, was one of the main contributors to the rise in second-quarter growth, with businesses spending and inventory investment also adding to output.
Government spending declined again in the second quarter as state and local authorities continued to pare their budgets, even though defense expenditures rebounded at 7.3 percent rate after contracting at a 12.6 percent rate in the first three months of the year.
Home building rose at a 3.8 percent pace, while investment in nonresidential structures increased at an 8.1 percent rate.
The easing of the auto parts disruptions and a drop in gasoline prices could be a tail wind to third-quarter growth, but economists are concerned that June data was rather weak.
The report also showed a moderation in inflation pressures, with the personal consumption expenditure price index rising at a 3.1 percent rate after rising 3.9 percent in the first quarter. Excluding food and energy, the core PCE index rose 2.1 percent, the fastest since the fourth quarter of 2009, after rising 1.6 percent in the first quarter. It overshot the Federal Reserve's preferred 2.0 percent level.